DynamicAction, the leading retail analytics guidance system, has released a deep industry analysis revealing the mounting pressures of post-Christmas consumer behaviour, leaving many retailers at risk of falling into a ‘Retail Vortex’ of increased costs, soaring returns, and inventory concerns in Q1, impacting important seasonal profits.
A strengthening yearly pattern that occurs between Christmas and mid-January, the trend was identified from more than £9.5 billion ($12.3 billion) in online consumer transactions over the holiday period between 25 December 2018 and 14 January 2019, accounting for more than £5.1billion ($6.6 billion) in Europe and £4.4 billion ($5.7 billion) in North America.
The analysis revealed four forces that combined to create the Retail Vortex; increased returns, higher marketing spend, more free shipping offers, and lower average order value (AOV). For example, Christmas returns started as early as 25 December 2018, across Europe and North America, and were up by an average of 31 per cent on the previous year through 14 January 2019. As well as significantly impacting profits, this increase in returns resulted in more products coming into store inventory, creating logistical issues such as stock misallocation. Marketing spend per online order also grew, with the analysis revealing a 5 per cent increase year over year during the same period, while a rise in free shipping offers combined with lower AOVs further heightened the effect of the Retail Vortex.
“Striking a balance between convenience for consumers and impact to the bottom line is essential. Retail is only getting more complex, especially during the crucial selling moments of the Christmas season, and retailers need to empower themselves with valuable insight from their data to ensure swift action is taken before the opportunity passes them by,” said John Squire, CEO at DynamicAction.
“Navigating the headwinds of the Retail Vortex will take more than looking at top-level metrics. To truly avoid being disrupted by the Vortex, retailers and brands must go deeper to analyse their customers by profitability and deliver corresponding discount strategies that will lead to an improved bottom line. As planning for peak Christmas trading is already in full swing, retailers must get control of their business strategies now to avoid the Retail Vortex that could impact their revenues in Q1. All too often the focus for retailers is on pre-Christmas sales, and post-Christmas returns are overlooked when calculating profit – yet have a significant impact on the business, whether that’s through lost revenues or misplaced stock.”
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